Greece in Crisis – What to Watch

Good Afternoon,

An escalation of Greece’s ongoing debt crisis could rattle financial markets around the world if the government fails to reach an agreement to break a five-month deadlock with international creditors.

Todd Mattina, Mackenzie Investments’ Chief Economist and Strategist, is watching the situation closely as it unfolds into the eleventh hour.

Dr. Mattina, who joined Mackenzie from the International Monetary Fund (IMF) last November, has outlined how he believes several scenarios could play out and the implications for global investors.

Below please find the link to the comments on the Crisis in Greece:

https://www.mackenzieinvestments.com/en/market-insights/market-commentary/market-alerts/2015/greece-in-crisis

The highlights:

• Most likely scenario: 11th hour agreement to provide continued short-run financing to Greece
• Long run sustainability of Greek public debt still remains in question

– Proposed fiscal adjustments could be a drag on economic growth

• Trade and financial linkages are modest – contagion of the Greek crisis to the rest of euro zone is unlikely – however, investors could reassess credibility of large fiscal adjustment plans (Italy, Spain)
• All parties have agreed to a lower target for primary Greek budget surplus – need to agree on credible spending cuts and tax hikes to reach new this new target
• Most likely – Greece arrives at political agreement with partners who could provide short-term funds
• A deal would avoid a shorter run crisis but would fail to find a long-run resolution for unsustainable debt burden
• If a deal is reached – uncertainty about contagion risk will decline, supporting peripheral bond markets
• In the event of a Greek Exit – markets may worry that another exit of a member could happen in time – high risk premiums or market stress would be possible as markets stress credibility of large fiscal adjustments

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Have a great weekend!

Tony Miceli

Certified Financial Planner

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